Move to GST should be gradual

That India has an incredibly complex indirect tax structure is indisputable. Complicating matters is the dual VAT system currently in vogue, with taxes imposed at both central and state levels and the separation between VAT for goods and VAT for services.

The proposed move, by April 2010, to a national unified Goods and Services Tax (GST) and a simpler indirect taxation system, will ease the situation considerably.

VAT: The word dreaded by buyers

But, a recent PricewaterouseCoopers study on the subject, "Shifting the Balance-the Evolution of Indirect Taxes", cautions that the transition has to be gradual. "…businesses need to start preparing themselves for the switch and to engage with the tax authorities to ensure that the GST system that emerges is as user- and business-friendly as possible," it states.

Adds S. Madhavan, Indirect Tax Leader, PricewaterhouseCoopers, India: "Globally, the universal model is a unified GST rather than the dual tax structure between the Centre and the states that we follow.

The sooner we adopt this best practice, the better."